Modern Control Techniques

What Are Modern Control Techniques?

In the world of management, controlling proves to be one of the most important tools. Every management organization has specific targets, and all managers desire to reduce the gap between these targets and the performances with the aid of controlling. Many experts and strategists of the management world have come up with several traditional as well as modern techniques of controlling to reduce the risks and losses in their businesses. 

The traditional techniques are dependent on non-scientific methods and have been used by organizations since time immemorial. They are still in practice and such techniques include personal observation, statistical reports, breakeven analysis as well as control over the budget. However, over time, some modern techniques have evolved in the management world to make the job a bit easier. These modern control techniques are more scientific and are of immense use nowadays as they are far more accurate and logical.

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A Few Such Techniques Include:

  1. Zero Base Budgeting

Renowned American management expert and business executive Peter Phyrr defined zero-based budgeting in 1970. Zero-based budgeting meaning is a bit different from other budgeting. The manager needs to prepare the budget and justify it from the very beginning of a base zero level. The managers have to carry the extra burden of proving how every facet of budgeting is important on his shoulders.

According to zero budget definition, the managers need to declare objectives of every activity that are going to be supervised by them. Then they can develop alternative plans as to how much they need to spend for comparatively smaller facets of every activity. These plans include the minimum amount to be spent on a project. 

When these plans have been chalked out, according to the next phase of zero-based budgeting definition, the managers need to focus on ranking them according to their priorities. But the job is not finished here. These plans need to be evaluated from time to time following their implementation so that any appropriate changes can be made if necessary. This zero-based budgeting process helps in planning as well as creating an effective budget for a project massively. 

  1. Analysis of Network

A network is a system where a number of plans are interconnected with each other. Thus network analysis is a technique which is used to plan and control complex relationships in a business. There are two types of techniques that are usually adopted by organizations in this regard:

  • Critical Path: In this technique, the tasks are subdivided into smaller entities by the managers and they look to find the relationship between these entities. Then with the help of flowcharts and mapping techniques, a network diagram is constructed to understand these relations. Getting an idea about these relationships helps a lot as they can now easily understand how a change in an entity will affect the others. This leads to better and effective planning for the future and boosts the performances.

  • Evaluating the Programme and Review: This technique is usually used by managers to plan and control projects. This technique comprises tasks like schedule planning, creating a budget, forecasting the number of resources required for various projects as well as coming up with alternate plans to boost the performances. 

This technique also requires the usage of probability and linear programming to help control management. Probability is required to measure the chances a project will be successful or not while the linear programming method is adopted to maximize the objectives of every individual who is a part of the project.

  1. Management Audit

Every organization needs to sit down at the end of the year and analyze the performances. Management audit is done for this purpose as each managerial function is assessed systematically to review their efficiency. It helps in understanding the shortcomings of the present management system and improve the performances in the future. The audit also helps in updating the existing policies of managers. Thus the coordination among various departments also increases manifold. There is no proper technique of this audit and depends on factors like skills and ethics. 

  1. Return on Investment

ROI is considered as one of the most useful techniques as it acts as an important measure for evaluating whether the amount of money invested can provide positive returns. Both the performances of the department and organization can be well understood through ROI. 

  1. Responsibility accounting

It is a system of accounting where different sections, departments and divisions are set up as responsibility centres for carrying out the various tasks assigned to them. The head of the centre has the responsibility to meet the targets of his centre. These centres are of the following types:

  • Cost centre

  • Revenue centre

  • Investment centre

  • Profit centre 

FAQs (Frequently Asked Questions)

1. What Are the Benefits of Zero-Based Budgeting?

Zero-based budgeting means an accounting technique practised by managers to think about how they can spend every single dollar in a budgeting period. The advantages of zero-based budgeting include these budgets are flexible, the execution is carried out in a disciplined manner, all operating expenses are clearly explained by the manager which helps in maintaining transparency and also helps to keep the legacy expenses in check. Thus the importance of zero-based budgeting is immense as the zero-based costing can give a different dimension to the organization. However, there are a few disadvantages of zero budgeting as often savvy managers manipulate the budget for their good. It takes a lot of time, cost and effort, which may not be possible by small organizations. Also, there seems to be a bias towards planning in the short-term.

2. What is Controlling?

Controlling is more like a fundamental managerial function where the activities of any organization are under the control and responsibility of the manager. It is a basis of comparison between the performances and the expected targets or goals set up initially. The controlling is done to bridge the gap between the targets and the actual performances and take the appropriate actions to boost the performances. Although management is an art, it also has a scientific edge to it. So with advancements in science, management has also kept evolving to come up with some modern techniques besides the more traditional ones.